1. SaaS METRIC OF THE WEEK: TTV - Time To Value: Time to value is similar to ROI (return on investment), but instead of realizing the financial success of an investment, it implies achieving the effectiveness of an investment or for a customer to realize value out of your product. There is also a corollary "trough of disillusionment" your customers may need to navigate.
2. PLANNING #1: Mike Tyson put it well - "Everyone has a plan 'till they get punched in the mouth." 2023's rising cost and startup land churn have been a metaphorical one-two-face punch. So, read here from an article by Lucas F. Costa on why long-term plans don't work (and how to fix them). 3. PLANNING #2: But the ying to the yang above, if you need to be better at planning, this is a great article on planning from First Round Capital and includes lessons learned from some of the best planners (along with their processes) at AirBnB and Eventbrite - it's a very deep read and has some fantastic templates (including the "W Framework") for you to put to work. 4. PLANNING #3: This year has sped by for me, and for many of you, your calendar EOY is Financial EOY - so question: How Dynamic Is Your Revenue Plan for 2024? Adding on to #2 above, who knows what new mouth-punch could stall or even reverse your growth aspirations next year, so it's time to pull operational techniques from other departments (i.e., your Dev squads Agile ways) to create a more dynamic revenue plan - take a good read of this article from SBI for hot tips on avoiding poor Sales-based strategic planning. It even comes with an (OK-ish) downloadable planning tool (which I took the liberty to snag and sacrifice my email address for you). First Round Capital feels the same way - Annual Planning is Killing Your Growth - but take a different tack - building a three-year plan! 5. SPEND: Question - How much do you plan on spending on your 2024 operational plan? SaaS Capital has a wonderful B2B SaaS Spending Benchmark report to best forecast what to send on sales, marketing, CS, COGS, and R&D. And because 2024 will continue to be a year of LeanOps - here is how to manage burn and extend your runway into 2024 from Capchase. 6. GROWTH: Growth ownership varies across the SaaS Spectrum, but according to this analysis from OpenView Partners, sales teams dominate in sales-led companies, handling most revenue and influencing KPIs, while on the opposing side, in product-led companies, product management plays a bigger role, owning activation and self-serve revenue. Growth teams often lack clear KPI ownership. Marketing typically handles sign-ups/leads, and customer success focuses on retention. 7. SALES: See the above article about sales-owned growth - Jason Lemkin adds strategic and tactical value this week. In 2024, sales teams face efficiency demands, requiring a 4x-5x return on their earnings. So here are his 15 ways to help your Sales Team next year. 8. LAYOFFS: Not quite a rosy outlook for 2024 - according to this article from Crunchbase, high-interest rates, funding challenges, and tighter budgets mean that Tech layoffs persist into Q4 of 2023, Amazon and Google included. Layoffs are nowhere near their peak at the start of the year as some post-COVID factors have stabilized. Still, layoffs are expected to continue into next year due to economic uncertainty and fewer hiring announcements, except in areas like generative AI. 9. META: There is a lot we still need to learn about the impact of social media, in particular those operated by Meta (Facebook, Instagram, etc). Last week, Meta launched their new Meta Content Library and API. This gives select researchers access to public data on Facebook and Instagram. This initiative aims to improve transparency about social media impact and how people use their platforms. This move is a response to regulatory pressure (and public demand) for more insight into social media's societal impact. 10. CASE STUDY: How moving to Freemium stalled Equals' growth. Initially, removing barriers like onboarding calls and payment requirements led to a user surge but resulted in stalled growth and poor engagement. It is a great lesson about how onboarding is more about convincing users to continue rather than just product accessibility, and sometimes adding friction is beneficial for long-term user activation and retention. POD OF THE WEEK: Failures! From Nick Mehta, CEO at Gainsight - his Top 10 Failures as a SaaS CEO & what he's learned. 1. SaaS METRIC OF THE WEEK: The SaaS Magic Number is simply the balance between Sales and Marketing Spend and new ARR/MRR created. It's a great number for indicative over or under-spend on marketing and sales (ARR efficiency!). Check the SaaS CFO on how to calculate the Magic Number. This article deconstructs it and highlights that it's a complex metric influenced by factors like market conditions and company spending, making it difficult to pinpoint specific areas for improvement.
2. AI part 1: We have to start here this week as we just experienced a crazy week-long year in Tech (and it's still unfolding, so this may already be old news). But to recap: Last Friday Sam Altman was the OpenAI CEO, this past Wednesday, Sam Altman was still the OpenAI CEO. I see no difference. 🤣. But in between, Sam was fired by his Board, a new CEO was then placed, Sam was almost rehired, then not hired as another CEO was hired (for 55.5 hours). Then, in a massive Coup, Sam was hired by Microsoft, 95% of OpenAI employees threatened to quit (including a Board member thought responsible for all this), then he was rehired by OpenAI, back to normal.....nothing to see here. As of the writing of this, we don't know why. Phew. Oh, and the Board has been replaced. 3. AI part 2: In non-popcorn-related AI news, the new AI silicon chip gold rush continues. Sam Altman (see above) has been investigating OpenAI producing their own chips. Microsoft will start using custom-designed AI Chips for their data centers, and NVIDIA, with hardly any current competition, crushed current earnings forecasts. 4. OUTBOUND vs INBOUND: How you handle an inbound lead vs an outbound lead is quite different. Check this article from Jack Jorgovan on how Outbound leads differ (and how to close them). Oh, and do you want to binge-watch some Outbound Sales TV? Yeah, I knew you would. The team at Predictive Revenue has been running over 50 outbound sales experiments to find out what works best (and what doesn't.). Watch the whole series on YouTube. 5. FINANCIAL FORECAST: Your 2023 new financial year is approaching! Now is always the second best time to start (the first being two months ago). This is an excellent article with a complimentary Excel download here from The SaaS CFO - it's a SaaS Financial Plan for Startups (and works for most SMBs). It also comes with a handy complimentary video tutorial for the worksheet. 6. DLG: The post on Scaling Developer-First Products was surprisingly popular a few weeks back. Do quite a few of you have a product that targets Developers? If so, then Developer-Led growth motion is the strategic choice. DLG is different from PLG as Devs are a finicky demographic. So get the DevRel ("Dev Relations") Report for 2023. The report itself is well-designed and interactive. It is also handy as Developers influence at least two-thirds of the decision to buy your product. 7. SECURITY: In recent years, APIs have become business critical. How business critical? Well, Traceable released a report last week (based on 1630 respondents) focused on the Global State of API Security, and here are some numbers for you: 88% of firms use over 2,500 cloud apps, 60% reported a data breach in the past two years, and of these, 74% had at least 3 API-related breaches. And finally, an average of 127 third parties are connected to organizations' APIs. 8. VENTURE: Pitchbook notes that 17.1% of all U.S. VC funding rounds in Q3 '23 were down rounds - but there is some light - according to a fresh Carta article, there is a shifting landscape in VC funding and deals, with a move away from investor-friendly terms despite a challenging environment for startups seeking funding. 9. GROWTH PLANNING: This is a two-part series: Part 1 outlines four high-level ways to grow revenue, and Part 2 - What growth levers should you choose for 2024? https://newsletter.mkt1.co/ 10. CASE STUDY: Zapier - one of my favorite amazing facts is Zapeir's 25k Landing Pages. But check this article as it's a massive deep dive on their journey from $0 to $230M ARR and $5B valuation: Bootstrapped with $1.3M funding, leveraging SEO (and landing pages!), partnerships, and a user-centric approach for rapid growth and Flywheels everywhere. POD OF THE WEEK: Great Podcast from the SaaS CFO reviewing the current landscape of private equity deals, the changing dynamics of valuations, and the importance of understanding the actual business model in SaaS companies. 1. SaaS METRIC OF THE WEEK: This is for all the Product people out there - Product Metrics, beyond the 5 base KPIs y'all should know (you can dive deeper here), this article outlines a comprehensive KPI system that can work for product team and other stakeholder, ensuring accountability, progress tracking, and strategic alignment, etc.
2. BUYERS: According to this new B2B software buyers survey, Many buyers are skeptical of information coming directly from companies and predominantly use Google and content marketing when researching and deciding on software purchases but prefer a range of formats to consume content and make decisions. 3. BENCHMARKS: The 2023 OpenView SaaS Benchmarks Report has dropped (based on 3,500 respondents), highlighting a dramatic drop in SaaS valuations, yet steady growth and increased financial efficiency. Key metrics include burn rates, profitability, and diversity in leadership. I'll dive deeper into this one in a couple of weeks. 4. VENTURE: DPI (Distributed to Paid-In Capital) is a measure of the total capital that a fund has returned to its investors (to date) and, when looking at their portfolio companies, VCs balance art and science in their exit strategies by selectively selling to secure early DPI gains without losing out on long-term growth potential, while being mindful of the impact on fund performance and LP expectations. 5. TESTING (MARKETING) 1/2: According to this article at Reforge, marketers often don't see expected big returns from testing because they choose to avoid major risks. Making bigger bets with strong business cases can lead to transformational success - it has some great IRL example bets from Groupon and Google, and there is also a "Big Bet Calculator" embedded in the article for you to use. 6. TESTING (MARKETING) 2/2: Experimentation and benchmarking are crucial for goal/KPI setting when starting with paid advertising experiments and calculating return on ad spend (ROAS) to scale those advertising efforts efficiently. Read here on how to maximize ROI on your early paid advertising efforts. 7. PLG vs. PLS: Product-led sales (PLS) and product-led growth (PLG) are definitely different: PLG uses product experience for growth, while PLS prioritizes and nurtures leads for sales, leveraging product insights for personalized campaigns and user nudges - learn more here. 8. AI: From the person who brought us Clippy - some guy called Bill Gates - comes a new article, "AI is about to completely change how you use computers." He predicts that AI-powered 'agents' will revolutionize computer usage within five years, enabling users to communicate in natural language and perform various tasks without switching apps. This could significantly impact sectors like healthcare and education and lead to the biggest shift in computing-based productivity since the transition from command lines to graphical user interfaces (again, this may be something he knows a bit about). 9. SECURITY: The 2024 Data Security Report is out and highlights AI's impact on security, emphasizing collaboration needs and increased budgets. Everyone is still overconfident in threat responses, and for 2024, data governance and security will be prioritized over AI initiatives. 10. CASE STUDY: The consumer version of ChatGPT is barely 10 months old, and it really upgraded features last week, but we already have OpenAI's Head of Sales, Aliisa Rosenthal, share the transformative growth story of ChatGPT, at SaaStr Annual and highlighted the future of AI, and Chat GPTs impact, especially in the workplace. POD OF THE WEEK: Prospecting - finding the right potential customers and leads is super tricky, so check this video from earlier this year on 6 steps to kickstarting your prospecting for next year and how to create a prospecting system from scratch. Also includes some good ChatGPT-based hacks to make it work. 1. SaaS METRIC OF THE WEEK: MRR! Recurring revenue models and usage-based pricing can be complex to reconcile, but David Kellogg's insights on transitioning from annual to monthly and leveraging Implied ARR are enlightening. According to this article, there are only 5 types of MRR growth, and they hinge on expansion and reactivation - areas traditionally overlooked. Benchmark your MRR here.
2. CUSTOMER OPERATING SYSTEM: What exactly is the difference between Customer Success and Customer Support? Get started here to understand the nuances. They are both part of the same customer journey spectrum, and Totango posits, in this recent SaaStr Annual presentation, that we need a fresher look at Success and Support that they coin the "Customer Operating System" (Like the presso? Here are the Google Slides deck). 3. OPERATIONAL PLAN: Because your new strategic year is just around the corner and now is the second best time to get started, Dave Kellogg has an excellent How-to guide on presenting your amazing new operating plan to your board. 4. PRICING 1: The title of this article says it all - 5 SaaS pricing mistakes you're probably making. Stop lowballing!, pick the right metric, make purchasing easy, optimize upsells, and keep pricing dynamic. 5. PRICING 2: The Quarterly report from Vendr: The SaaS Trends Report for Q3 2023 (b2b only) is out. The remarkable drop-off in ACV that we referenced a few months back for Q2 looked like a blip, but ACV is still down 17% YoY. We're all hiking prices like crazy, though, and CAC is at a 3-year high - doubled since 2020! 6. VENTURE: Here is an interesting side note from Carta late last month: Seed and Series A funding sizes are rising; median seed at $3.2M, Series A at $9.1M, showing a positive trend for startups for the first time in 2 years. Hopefully, this remains a positive trend, as I reported a few weeks back, Carta's Q2 report painted a far from rosy picture of about a 1-in-5 raises also being a down round. 7. QUOTAS: Planning time again - Tomasz Tunguz asking questions related to #5 last week but with a sales focus given rises in AI, CAC, decreases in ACV, and budgets: How much should Quotas increase next year? His back of the napkin Math is 20%. 8. GOOGLE: This one is juicy - thanks to an ongoing court case, we get to temporarily peak into Google's most lucrative search queries over one week. The top Google revenue queries are dominated by iPhones, insurance, flights, and cable/internet services, where advertisers bid aggressively for high-value customer acquisitions. Unfortunately, there is no indicator of what the cost per click is - but judging by the Hubspot study they also referenced, they look to be in the high three to the low four-figure range. 9. AI: Big announcements on the high end of AI town. OpenAI officially launched the ChatGPT Store, with the potential for massive revenue growth via third-party developers. They are not calling them apps, though - but "GPTs." Microsoft, in its earnings call, announced that GitHub Co-Pilot has over a million paying users, which is an indicative ARR of about $150 million. 10. CASE STUDY: Complementing #4 and #5 above, Pricing: it varies. So check these case studies: Atlassian had one model; Intercom, several; Loom (now part of Atlassian!) changed with growth. There is no perfect pricing; there are always trade-offs and deep experimentation. POD OF THE WEEK: See#4, #5, and #10 - one of the best growth levers you can work on for 2024 is pricing and monetization. So check the podcast about the art and science of pricing from Lenny's Podcast. 1. SaaS METRIC OF THE WEEK: CAC Payback - the 'payback' period is the nuance of why we measure CAC. How long until we break even? Benchmark-wise, the negative trough is way longer than you think. New B2B customers, on average, take 2 years and 2 months to become profitable. This highlights a deepening dependency on access to capital to fund a SaaS company's growth through these SaaS Cash Flow troughs. Here is an article that looks at ways to shorten CAC Payback, and this article takes an operator view on CAC Payback that includes (and celebrates) the value of net revenue retention.
2. AI OPEN SOURCE: According to this article from Crunchbase, many Startups are turning to open-source large language models (LLMs), challenging major "incumbents" like OpenAI - it's weird to call OpenAI an incumbent. Backed by investors seeking cost efficiency, these open-source alternatives offer a bunch of benefits, such as more flexibility, lower expenses, and competitive pressure, despite being technologically behind. 3. AI: Speaking of actual "incumbents," earlier this year, Mark Roberge of Stage 2 Capital took a look at the hype cycle with AI and asks who could win the go-to-market AI race - Startups vs Incumbents? Adding fuel to this one with CB Insights AI 100, the 100 most promising AI startups this year. 4. CLOUD: So let's back up the statements in #2 and #3 above with some incumbent data, given that the big Cloud players just had some Quarterly earnings calls. Looking at the Clouded Judgement summary, AWS, Azure, and Google Cloud hint at an uncertain re-acceleration for software (YOY - AWS: 12%, Azure: 28% YoY, and GCP: 22% YoY), Azure's AI contributed significantly, as without AI, its growth actually decelerated. SaaS valuation medians show overall 5.4x, High Growth of 11.0x, Mid Growth of 7.5x, and Low Growth 3.4x. Checking in with the Tomasz Tunguz analysis, he also notes Microsoft's AI-fueled growth, diversifies algorithms and boasts a booming Copilot business. Google's growth decelerates (28% to 22%), but their AI products like Duet expand. 5. INVESTMENT: A couple of weeks back, I posted that Andreessen Horowitz is back with a new, post-pandemic manifesto, 'The Techno-Optimist Manifesto'. However - looking at their 2023 investment pace so far - that manifesto is all words and diminishing dollars. Last Q was the lowest for the firm in seven years (11 deals/$1.5B) - but to be fair, this is all relatively optimistic compared to their VC peers. 6. CUSTOMER SUCCESS: For all you CS-focused people - ChurnZero has released this year's Customer Success Leadership Study - they have been running this since 2020, so we can start to measure trends: The percentage of CS teams that own the renewal process is trending downward, with dedicated renewal teams picking up the difference and Key CS metrics have shifted, with teams putting more focus on churn rate, renewals, and expansion revenue. 7. B2S: The "S" here is for Startups - do you sell to other startups? If so, Olena Avramenko, from Miro, emphasizes treating startups as a unique user category. She outlines creating a startup program, securing internal buy-in, establishing measurable outcomes, launching minimally, and scaling thoughtfully, highlighting real-world insights. 8. ENGINEER vs ENTREPRENEUR: Good context for #10 below. I love this article as it also represents the battle in my head: Engineers love to get it right, and Entrepreneurs love to get it done. It is such a simple statement that materializes in so many ways. 9. PLANNING: 2024 is almost here - and it's the time of year when I start emphasizing articles centered around planning. This year has seen startups face unprecedented churn pressures, rising costs, and an increased time gap between funding rounds, pushing a shift in strategies - to address these pressures, this piece emphasizes restructuring customer interactions and reassessing team roles to enhance value and streamline costs into 2024. 10. CASE STUDY: A masterclass in Scaling Developer-First Products with Eeke de Milliano. Developer-first companies like Stripe and Twilio revolutionized product development by prioritizing developer needs and preferences at every operational level, from marketing to customer success. POD OF THE WEEK: This was a good listen for me - in B2B land, we're not up against "the competition"; we're up against buyers' inaction. They are more worried about messing up than making a decision. Resonate with you??? Then, take a listen to April Dunford talking with Lenny's Newsletter on typical B2B purchasing processes and providing a two-part sales pitch structure that could actually transform your sales process. |
Archives
October 2024
|